Performance has grown steadily, and cost rates have been continuously optimized. In 2023, Guangzhou restaurants achieved revenue of 4.901 billion yuan/ +19.17%, and net profit of 550 million yuan/ +5.21%. 2024Q1 achieved revenue of 1,012 billion yuan/ 10.04%, net profit attributable to mother of 171 million yuan/ +2.22%, and an expense ratio of 19.34%/-2.25pcts for the period.
The catering business recovered strongly after the epidemic, and the company insisted on expanding its stores and was resilient enough. The company's catering business revenue in 2023 was 1,263 million yuan/ +65.66%, gross margin increased 18.03 pcts year-on-year, and 24Q1 revenue was 384 million yuan/ +13.33%, mainly benefiting from the concentrated release of offline catering demand after the epidemic, and the catering industry's operating performance recovered significantly. According to social zero data disclosed by the National Bureau of Statistics, total food and beverage revenue for the full year of 2023 was +20.4% year-on-year, and +10.8% year-on-year in January-March 2024, and industry prosperity increased. The company's catering business is based within the province, while at the same time speeding up the pace of expansion outside the province. Two-wheel drive within and outside the province, 7 new restaurants were added in 2022, including 5 stores in Guangdong Province and 2 stores outside the province, laying the foundation for the company to achieve greater flexibility in revenue and profit after the epidemic. In 2023, the company seized the industry's recovery window and added 14 new restaurants, consolidating the foundation for growth and strong development resilience.
The food business is performing steadily, and the release of production capacity is expected to drive growth. The company's food processing business had revenue of 3,534 billion yuan/ +8.63% in 2023, and revenue of 603 million yuan/ +8.99% in 24Q1, with steady growth. The company determines production based on sales, and the production and sales rate is high. In 2023, the company's mooncake/frozen food production and sales rate reached 96.9%/97.4%, respectively. The four major production bases in Guangzhou, Maoming, Meizhou, and Hunan Xiangtan are linked across regions to improve production efficiency. In 2023, a quick-freezing production workshop at the Xiangtan base was completed for trial production, and the Guangzhou base capacity upgrade project was approved. The gradual release of production capacity is expected to drive the growth of the food business. Furthermore, with consumers' pursuit of quality and the rejuvenation of the customer base, consumers' purchasing power for high-end frozen food is expected to increase, raising the price ceiling in the industry. The company set up the prepared food business earlier, and is expected to enjoy the dividends of the industry's growth.
Investment advice: The company's net profit for 2024/2025/2026 is expected to be 642/7.29/831 million yuan, respectively, up 16.6%/13.6%/13.9% year-on-year. Taking advantage of the strong restoration of the restaurant industry, the company insists on expanding stores to consolidate the foundation for growth. The production capacity of the food business is still in a continuous upward phase, driving the company's food business growth. The two-wheel drive has sufficient growth momentum and maintains a “buy” rating.
Risk warning: Competition in the catering industry intensifies; capacity expansion falls short of expectations; food safety risks.